Oak Pacific Interactive has raised US$430 million for a 35 percent stake in the company from Softbank, JOHO Capital and SBI. This investment effectively values Xiaonei, Oak Pacific’s “Chinese Facebook” site, at over US$1 billion (this Caijing article says 90 percent of Oak Pacific’s slides shown to investors were about Xiaonei).

We have seen reports that Xiaonei had revenue of only RMB 10 million in 2007, but is looking to reach RMB 10 million a month by the end of 2008. While most revenue currently comes from advertising, Xiaonei is probably looking to emulate Tencent’s revenue model of virtual item sales and other Internet value-added services—Tencent made $344 million from Internet VAS last year. Xiaonei has introduced its own virtual currency, “Bean Coins”, and users can send virtual gifts to each other (though this service is currently free). The site offers a service that lets users pay RMB 10 to simplify the link to their Xiaonei profile page. Xiaonei is also looking to build e-commerce and online gaming into its platform.

Another interesting aspect of this story (which Benjamin Joffe at Plus8star points out) is that Xiaonei is receiving an astronomical valuation after its founder, Wang Xing, sold the company to Oak Pacific for just $2 million less than two years ago. As Joffe mentions, it is hard to complain about selling a company for $2 million less than a year after founding it, but you have to wonder what Wang thinks about Xiaonei now being valued at over $1 billion. I guess you just have to applaud the fundraising prowess of Joseph Chen and the Oak Pacific team (Wang Xing says he had sell to Oak Pacific because he had no other funding lined up in the summer of 2006).

With 22 million registered users, Xiaonei is trying to expand beyond the student market. But will Xiaonei’s name itself, which means “On Campus”, be a hindrance to signing up non-student users? Could there be a name-change for the site in its future? Or maybe Oak Pacific could acquire Wang Xing’s new social networking site, Hainei.com, whose name implies a much broader user base. Somewhat surprisingly, Wang says that Oak Pacific did not attempt to dissuade him from launching Hainei, which is similar to Xiaonei in name and design.

Just for fun, some screenshots of some Chinese social networking sites that borrow Facebook’s design:



Xiaonei's homepage



Hainei.com



Yiqi.com, which borrows from Facebook’s design but uses a red color scheme. Yiqi was founded by former Hexun CEO and general manager of Yahoo China (for 40 days).